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Barrick Turns to Asset Sales to Boost Returns

TORONTO–Barrick Gold Corp.’s new chief executive, tapped earlier this year to boost share value, has already promised investors a more disciplined approach to capital investment. Now, he’s looking to sell what many once considered one of the company’s crown jewels.

Barrick, the world’s largest gold miner by output, said earlier Thursday it’s in early talks with China National Gold Group Corp., a big Chinese gold miner and refiner, to sell its 73.9% stake in African Barrick Gold PLC, Tanzania’s largest gold miner. African Barrick Gold produces about 700,000 ounce of gold a year, ranking it among Africa’s top five gold producers.

Analysts say Barrick’s decision is consistent with its renewed focus on developing only its most profitable mining assets. The new discipline comes after the resignation of former Chief Executive Aaron Regent in June. He was replaced by Jamie Sokalsky, the firm’s long-term chief financial officer.

Barrick said the deal isn’t done, and it comes as gold prices have fallen recently from their high – meaning Barrick won’t get the top of the market if it does sell. But investors are cheering. Barrick Gold is up 3.8%, or 1.29 Canadian dollars, at C$35.55, in Toronto midday.

Last month, Barrick said its second-quarter earnings fell by more than a third, citing rising costs and lower gold production. Meanwhile, African Barrick last month reported a 14% drop in production for the first half of the year, hurt in part by higher energy costs and an unstable power grid in Tanzania.

The possible sale comes a little more than two years after Barrick Gold created African Barrick by selling a 25% stake in its African assets through an initial public offering and listing the shares on the London Stock Exchange. At the time, Barrick said the move would provide African Barrick with more options to grow and generate value.

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